Capitalization table

A capitalization table (or cap table) is a table providing an analysis of the founders' and investors' percentage of ownership, equity dilution, and value of equity in each round of investment.

Overview

A capitalization table demonstrates the snapshot of an ownership structure of an enterprise. Cap tables are widely used by entrepreneurs, venture capitalists, and investment bankers to model and to analyze events such as ownership dilution, issuing employee stock options, or issuing new securities. After several rounds of financing, a cap table can become highly complex.

Waterfall analysis

As a cap table becomes more complex, the ownership percentages indicated on the cap table can diverge from actual percentage of proceeds distributed to shareholders upon a liquidity event. Some industry commentators have called the difference between actual ownership percentage on the cap table and a shareholder's percentage of exit proceeds "accounting ownership" (actual ownership percentage on the cap table) vs. "economic ownership" (percentage of proceeds available to equity).

This situation leads to the concept of a "waterfall" or "waterfall analysis." A waterfall analysis details the exact payouts to every shareholder on a company's cap table based on a specific amount of proceeds available to equity in a particular liquidity scenario. Since a company often does not know if, when, or how it will achieve a liquidity event, waterfall analysis typically covers a range of liquidity assumptions. Liquidation preference charts extend the analysis, showing the economic outcome available to investors at all valuations across a ranges of outcomes, rather than focusing on a specific point or a discrete set of points.

External links

• How to make a cap table
• Capography Helps Entrepreneurs Manage Their Cap Table Without The Excel Headache
• Sample capitalization table on a spreadsheet
• Cap table of Everpix